Euronews

The European Central Bank is to have the primary role in shutting down eurozone banks it decides are too weak to survive.

That was confirmed with a compromise agreement between the European Parliament and EU member states on how the region’s banking union will work.

The deal limits the scope for a country’s finance ministers to block closures.

Michel Barnier, the European commissioner in charge of regulation, said it would allow more effective management of bank crises: “I’m absolutely convinced that this reform of the banking union is a revolution for the European banking sector and it’s probably the most significant reform for us, Europeans, since the creation of the euro.”

The agreement establishes a common 55 billion euro fund to come from the banks to cover costs. It is to be built up over the next eight years. Critics say that is just not big enough.

Spain and France had hoped the banking union would spread the burden of problem banks across the entire eurozone: Germany – the region’s strongest economy – rejected that. Berlin did not want its taxpayers on the hook for deposits in other countries.

The banking union, and the clean-up of banks’ books that comes with it, is intended to restore confidence, but among depositers that will take a long time; and even the European Central Bank says it is too complex and inadequately funded.